There is a difference between tax evasion and tax avoidance since the former is illegal while the latter is not. According to TransLegal, evading tax is equivalent to running away from the taxman because you intentionally don’t want to remit your taxes, while avoiding tax comes about when you use ingenious ways to reduce your taxes without breaking a single rule within the national tax system. It’s therefore possible to lead a financial stress-free life in the UK by learning how to avoid and save tax. Remember that you can do this as an individual, a family or as a business entity.
Engage Your Spouse
Have your income-generating assets put under the name of the marriage partner with the least tax obligations. Pick on assets such as investment funds, shares, jointly owned real estate investments, and building society funds. Note that this strategy is made possible by numerous tax exemptions that the UK government extends to married couples. Keep track of tax breaks for married couples since they change as per the government’s tax policies; it’s, for instance, currently possible to transfer up to GBP 1000 worth of tax to your wife or husband, depending on who has the lowest annual income, notes This is Money.
Make Use of Your Pension Plan
Put your pension plan in the forefront as a tax reduction tool, since financial analysts who specialise in the UK tax market point this out as one of the best ways to save tax. Have a keen look at your retirement fund plan to see whether it includes tax-free contributions and asset growth benefits. Allow your employer to make direct contributions to your pension kitty to further exempt you from National Insurance contributions and line you up for government tax rebates. Sacrifice part of your salary to non-taxable schemes such as child care vouchers – a sacrifice of GBP 55 per week can, for instance, save you GBP 886 in taxes each year, besides driving your National Insurance payments even lower.
Claim All Your Allowances
Venture into self-employment to enable you claim extra costs whether you run your business outfit from home or an office at the heart of London. Include your heating, electricity, property and car insurance as well as council tax bills in your list of claims, which can as well include mortgage and bank loan interests, and general repairs. Note that this plan subjects you to CGT charge when you sell the house or if you devote a part of it to the business, even if it’s just one room, says The Telegraph.
Invest in Tax-Efficient Ventures
Invest in business opportunities such as Enterprise Investment Scheme, or EIS, and Venture Capital Trust, abbreviated as VCT. Understand how these tax reduction strategies work to take full advantage of them, which are crafted to help support small businesses in the UK. Buy shares from companies that qualify for these schemes if you’re, for instance, aiming at an overall tax reduction rate of over 20 per cent per annum.
Find out more about these legal tax saving strategies in the UK and combine the best of them to steer off excessive tax legally to attain a rock-solid financial standing in life.